Sen. Mitch McConnell calls deficit ‘very disturbing

Sen. Mitch McConnell calls deficit ‘very disturbing,’ blames federal spending, dismisses criticism of tax cut

Damian Paletta Washington Post

Senate Majority Leader Mitch McConnell on Tuesday called the ballooning budget deficit “very disturbing” but said large federal spending programs were to blame, dismissing criticism that last year’s GOP tax cuts are saddling the country with more debt.

McConnell, in a Bloomberg News interview, also said there was little chance Republicans would be able to cut government spending next year if they retained control of Congress because any changes would need leadership from Democrats.

McConnell (R-Ky.) said that tackling the mandatory spending programs such as Medicare and Social Security, as well as Medicaid, could not be done by Republicans alone, suggesting that it was unlikely to occur unless Democrats controlled at least one chamber of Congress.

McConnell’s comments come as part of a fierce effort by Republicans and Democrats to reframe economic issues as they campaign ahead of midterm elections, which are in three weeks. Democrats have blamed last year’s GOP tax cut law for adding a projected $2 trillion to the debt over 10 years, while Republicans have castigated liberals for proposing an expansion of government health care programs.

But Republicans have abandoned numerous budget demands they put in place during the Obama administration, including an insistence that any new spending be offset by other cuts. They have also repeatedly raised the debt ceiling without seeking any budget changes and waived rules put in place to prevent an increase in the debt.

McConnell said that tackling the mandatory spending programs such as Medicare and Social Security, as well as Medicaid, could not be done by Republicans alone, suggesting that it was unlikely to occur unless Democrats controlled at least one chamber of Congress.

“I think it’s pretty safe to say that entitlement changes, which is the real driver of the debt by any objective standard, may well be difficult if not impossible to achieve when you have unified government,” McConnell told Bloomberg News.

McConnell’s comments came one day after the White House reported that the government ran a deficit of $779 billion in the fiscal year that ended Sept. 30, a 17 percent increase from the year before. The deficit is expected to near $1 trillion next year and then surpass that level in 2020 and beyond, according to the Congressional Budget Office.

Higher spending and stagnating tax revenue pushed the nation’s debt burden higher, the White House said. Business tax revenue fell sharply in the first nine months of this year because tax rates were cut under last year’s law.

Republican leaders, and White House officials, had promised that all of the lost revenue from the tax cut would be recouped from higher economic growth, though many budget experts from both parties believe this is unlikely.

“As November approaches, it’s clear Democrats stand for expanding affordable health care and growing the middle class, while Republicans are for stripping away protections for people with pre-existing conditions and cutting Medicare, Social Security, and Medicaid to fund their giveaways to corporate executives and the wealthiest few,” Senate Minority Leader Charles Schumer said after McConnell’s comments were published.

The economy is growing at a faster clip this year, but analysts believe it will soon begin to slow, in part because of higher interest rates, growing debt, and lower corporate earnings.

It is very unusual for the deficit to grow during a strong economy, as economic growth tends to bring in more revenue and lead to a drop in spending on things like low-income assistance.

But the White House and GOP leaders have pursued policies that increase spending and cut tax rates in the past 18 months, as Trump has said he is trying to rev the economy to encourage more growth. The tax cuts alone were projected to add $100 billion to the deficit this year, though some White House officials have dismissed those estimates.

Democrats warned during the tax cut debate that Republicans would widen the deficit through tax reductions and then seek to recoup the losses by cutting programs such as Medicaid, a health care program for poor and low-income families, and they seized on McConnell’s comments on Tuesday.

“Like clockwork, Republicans in Congress are setting in motion their plan to destroy the Medicare, Medicaid and Social Security that seniors and families rely on, just months after they exploded the deficit by $2 trillion with their tax scam for the rich,” House Minority Leader Nancy Pelosi (D-Calif.) said in a statement.

The government is projected to spend $4.47 trillion this fiscal year, according to CBO, and bring in just $3.49 trillion in revenue. The government will cover that $981 billion gap, known as the deficit, by borrowing money through issuing new debt.

There are a range of buyers of the debt, including China, but the cost of borrowing money rises as interest rates increase. The government is projected to spend $390 billion on debt interest payments, almost as much as the $401 billion it will spend on Medicaid.

For the first time in U.S. history, the government will spend more than $1 trillion on Social Security benefits this year, and another $776 billion on Medicare, which is a health-care program for older Americans.

Combined, Social Security, Medicare and Medicaid will account for 49.7 percent of all government spending this year, according to CBO, down from 50.6 percent in 2017. Defense spending, meanwhile, will account for 15 percent of spending this year, up from 14.8 percent in 2017.

Republicans spent most of the Obama administration complaining about increases in government spending, but they have largely backed down during the Trump administration, supporting his proposals to raise spending and cut taxes as part of his agenda.

Speaker of the House Paul Ryan (R-Wis.) emerged as a leader of the Republican Party in recent years because of his insistence that the government do more to cut spending, and White House budget director Mick Mulvaney earned credibility with conservatives by taking a hard-line stance on debt when he was in Congress.

But neither Ryan nor Mulvaney have been able to advance major initiatives to cut spending since Trump took office, and Mulvaney has said Trump has rebuffed proposals to address programs like Medicare.

The U.S. government has more than $21 trillion in debt by some measures, and the aging population, combined with rising health-care costs and large debt interest payments, are projected to make the debt grow even faster in the near future.

McConnell blamed the recent run-up in the deficit on Medicare, Medicaid and Social Security, but there haven’t been policy changes in those programs to explain the major run-up in the debt in the past two years.

The bigger changes have instead been bipartisan agreements to remove spending caps on things such as the military, and last year’s tax cut.

White House National Economic Council Director Larry Kudlow said in New York last month that the White House planned to try to address high levels of government spending next year, but he wouldn’t offer more details.

“I don’t want to be specific, I don’t want to get ahead of our own budgeting, but we’ll get there,” Kudlow said at the Economic Club of New York. “But I agree, we have to be tougher on spending.”

During the 2016 campaign, Trump vowed not to cut Medicare, Social Security or Medicaid if he became president. He has largely stuck to his promise not to cut Medicare, but he has proposed Medicaid cuts, and his advisers have also sought to make cuts in Social Security disability spending.

These proposals have largely fallen flat in Congress, however, as the White House didn’t signal that it planned to make any changes a priority, and lawmakers are often reluctant to take on divisive political issues without presidential leadership.